Plan B Forum

The United States' credit rating was cut for the first time when Standard and Poor's lowered it from triple-A to AA+, citing the country's looming deficit burden and weak policy-making process.

Standard and Poor's on Friday revised the nation's rating downwards to a AA+ with a negative outlook, despite a push back from the White House, which said the rating agency's analysis of the US economy was deeply flawed.

It was the first time the US was downgraded since it first received a triple-A rating from Moody's in 1917; it has held the S&P rating since 1941.


Moody's and a third ratings agency, Fitch, say they continue to study the deficit plan to see if the US merits being kept in their ranks of triple-A countries.

The blow came after the White House, Democratic and Republican legislators agreed during the week to a deal to raise the nation's debt ceiling after months of wrangling that sent jitters rippling through the global economy still trying to recover from the 2008 recession.

A debt downgrade will be a symbolic embarrassment for President Barack Obama, his administration and the Americans, and could raise the cost of US government borrowing.

Since the dollar and US Treasury bonds are so central to world trade and finance, a downgrade theoretically could rock the global economy, which is already being battered by the eurozone crisis.

But some analysts have questioned whether a ratings cut would impact demand for US debt, have dismissed the raters as having low credibility, and questioned whether the markets would take much notice.

Ratings agencies Moody's and Fitch both reaffirmed their triple-A rating of US debt shortly after Obama signed a bill raising the debt ceiling on Tuesday.

The downgrade technically signalled that it is more likely than before that the United States could renege on its debts.

Read more: http://www.smh.com.au/business/us-has-i ... z1UD2LuhJb

The US "must do better" in tackling its pressing economic challenges, the White House says, after a deal on debt was signed into law last week.

Spokesman Jay Carney said the talks on raising the US debt ceiling in order to avoid a default had taken too long and been too divisive.

The statement comes a day after rating agency Standard & Poor's downgraded the US's top-notch AAA rating to AA+.

The US uncertainty led to a week of turmoil on the world financial markets.

There were fears that the US could be heading for a double-dip recession and that the sovereign debt crisis in the eurozone could spread to Italy and Spain.

The compromise US debt deal, which was passed in the Senate on Tuesday, raises the debt limit by up to $2.4tn (£1.5tn) from $14.3tn, and makes savings of at least $2.1tn in 10 years.

Mr Carney said the deal had been "an important step in the right direction", but added that "the path to getting there took too long and was at times too divisive".

bbc report

MOODY'S obviously didn't plan it, but it downgraded Australia's big four banks almost 25 years to the day after Paul Keating told John Laws that Australia was living beyond its means, and in danger of becoming a banana republic.

Keating's comment in mid-May 1986 tipped the dollar into a slide that carried it from above US74¢ to just under US60¢ in three months, and tipped the nation into a period of introspection and economic reform.

The Hen wrote:Of course the years HAVE aged him.



Keating and Kezza last year.

dgs49 wrote:Out of one side of their mouth they complain that the "stimulus" was too timid - that the Dems didn't waste enough money on it, and out of the other side of their mouth they blame the deficits on the previous administration.
The audacity and stupidity of these complaints is mind-boggling.

dgs49 wrote:"...

The funniest thing about the whole fiasco is the after-reaction of liberals like the Rubato person. Out of one side of their mouth they complain that the "stimulus" was too timid - that the Dems didn't waste enough money on it, and out of the other side of their mouth they blame the deficits on the previous administration.

The audacity and stupidity of these complaints is mind-boggling.

dgs49 wrote:However, if government spending does not stimulate economic growth, nor lead to increase tax revenues, then borrowing and spending ON TOP of what must already be borrowed and spent merely to keep our government operating, seems rather foolish, eh what?

liberty1 wrote:Unless it's a bureaucrat type job (parasitic), what you are calling a stimulous job like building a road or bridge, it's only temporary.